Case Study: Interpreting Policy Language – Part 2

In Part 1 of this post, we started to look at the recent case Leonor v. Provident Life and Accident Company[1].  The key issue in this case was whether the policy language “the important duties” meant “all the important duties.”  In Part 2 of this post, we will look at how the court addressed the parties’ arguments and see how the court ultimately resolved the dispute.

The Law

Under Michigan law, ambiguous words in a disability policy are construed in favor of the insured.  A word or phrase is ambiguous if the word or phrase may “reasonably be understood in different ways.”  Because of these rules, in order to win his case, the claimant, Leonor, did not have to come up with an interpretation that was superior to the interpretation offered by the insurer, Provident Life.  Instead, Leonor merely had to establish that the policy language was ambiguous and then come up with a reasonable interpretation of the policy language that supported his claim for benefits.

The Analysis

The court began its analysis by recognizing that context is important when interpreting a contract.  The court acknowledged that the definition of “residual disability” was obviously intended to be a less severe category of disability, and even acknowledged that the terms “total disability” and “residual disability” had to be mutually exclusive for the rest of the policy to make sense.  Nonetheless, the court determined that the phrase “the important duties” was ambiguous.

By way of illustration, consider the following continuum, beginning with no limitations and ending at the inability to perform all of the important duties of an occupation.

    |———————————–|———————————–|———————————–|

No Limitations            Unable to Perform            Unable to Perform                  Unable to Perform                                             Some Duties                      Most Duties                         All Duties

Essentially, the court determined that the “residual disability” definition was broad enough to encompass individuals who could not perform “some” of the duties of their occupation, but was not broad enough to encompass individuals who could not perform “most” or “all” of the duties of their occupation.  Thus, the policy language remained ambiguous because the “total disability” definition could still mean either the inability to perform “most” duties or the inability to perform “all” duties.

Next, the court determined that Leonor’s interpretation of the policy language was reasonable.  The court explained that, under the rules of grammar, the definite plural does not necessarily apply to each thing in the group referred to.  To support its position, the court noted that Provident Life’s own counsel argued at oral argument that its position was supported by “the rules of grammar” even though Provident Life’s counsel obviously did not mean to suggest that its position was supported by “all the rules of grammar.”

Finally, the court held that a claimant’s income is “far from dispositive” in disability cases.  Specifically, the court determined that Leonor should not be penalized for earning more income after his injury than he did before the injury.  The court noted that because investing in businesses is inherently risky, it was entirely appropriate for Leonor to insure himself against the loss of the guaranteed, steady income provided by the dental procedures.

The Decision

In the end, the court determined that Leonor was “totally disabled” under the policies because the phrase “the important duties” was ambiguous and Leonor had offered a reasonable application of the phrase that supported an award of benefits.  The court ordered Provident Life to pay Leonor his benefits under the policy, plus 12% interest as a penalty for failing to pay the claim in a timely fashion.

Conclusion

This case demonstrates how the presence or absence of a single word in a policy can dramatically affect your ability to recover benefits.  Even language that is not necessarily unfavorable, but merely ambiguous, can delay your recovery of benefits if you have to go to court to resolve a dispute with the insurer.  For example, in the Leonor case, Leonor made his initial disability claim in July 2009, but the court did not conclusively establish he was entitled to benefits until June 2015—nearly six years later.

If possible, you should avoid ambiguous and unfavorable language when purchasing a policy.  If you already have a policy, an experienced disability insurance attorney can review your policy and identify words or phrases that could impact your ability to recover benefits in a timely fashion.

[1] 790 F.3d 682 (6th Cir. 2015).

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Case Study: Interpreting Policy Language – Part 1

Can the presence or absence of a single word in your disability policy determine whether you receive your disability benefits?

In the recent case Leonor v. Provident Life and Accident Company[1], the key issue was whether the policy language “the important duties” meant “all the important duties.”  In Part 1 of this post, we will look at each party’s position in the case and examine why this policy language was so important.  In Part 2 of this post, we will look at how the court addressed the parties’ arguments and see how the court ultimately resolved the dispute.

The Facts

In the Leonor case, the claimant, Leonor, was a dentist who could no longer perform dental procedures due to an injury and subsequent cervical spine surgery.  Prior to the injury, Leonor spent approximately two-thirds of his time performing dental procedures, and spent the rest of his time managing his dental practice and other businesses he owned.  After the injury, he no longer performed dental procedures; instead, he sought out other investment opportunities and devoted his time to managing his investments.  Interestingly, Leonor’s income actually increased after he stopped performing dental procedures because his investments turned out to be very successful.

The Policy

Leonor’s disability policy provided for benefits if he became “totally disabled,” and defined “totally disabled” as follows:

“Total Disability” means that because of Injury or Sickness:

You are unable to perform the important duties of Your Occupation; and

You are under the regular and personal care of a physician.

Leonor’s policy also provided for benefits if he became “residually disabled,” and defined “residually disabled” as follows:

“Residual Disability,” prior to the Commencement Date, means that due to Injury or Sickness:

(1) You are unable to perform one or more of the important duties of Your Occupation; or

(2) You are unable to perform the important duties of Your Occupation for more than 80% of the time normally required to perform them; and

Your loss of Earning is equal to at least 20% of your prior earnings while You are engaged in Your Occupation or another occupation; and

You are under the regular and personal care of a Physician.

The Arguments

The insurer, Provident Life, argued that Leonor’s managerial duties were “important duties” of his occupation prior to his injury, and therefore Leonor was not “totally disabled” because he could still perform managerial duties in spite of his injury.

Leonor responded that the policy language only required him to be unable to perform “the important duties” of his occupation.  He pointed out that Provident Life could have required him to be unable to perform “all the important duties” of his occupation.  Since Provident Life did not include the word “all,” Leonor argued that it did not matter whether he could still perform managerial duties because he could no longer perform other “important duties” of his occupation—namely, performing dental procedures.

In response, Provident Life argued that, when read in context, “total disability” plainly meant the inability to perform “all the important duties” because the policy separately defined “residual disability” as being unable to perform “one or more of the important duties.”  Thus, according to Provident Life there was already a category under the policy that covered individuals like Leonor who could not perform “some” of the important duties of their occupation.  Provident Life also argued that Leonor should not receive total disability benefits because Leonor’s income after the injury was higher than it was prior to the injury.

Stay tuned for Part 2, to find out how the court addressed Principal Life’s arguments and resolved the dispute.

[1] 790 F.3d 682 (6th Cir. 2015).

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Disability Insurer Profiles: MassMutual

We have written about Unum, arguably the most notorious disability insurance company, in great detail.  However, we realize that many physicians and dentists may not know very much about other disability insurance companies, including those whose policies they own.  In the next few posts, we’ll profile some of the most common doctors’ disability insurers.

Company: Massachusetts Mutual Life Insurance Company, a.k.a. MassMutual.

Location: Springfield, Massachusetts.

Associated Entities: Mass Mutual Financial Group (parent  company), C.M. Life Insurance Company, MML Bay State Life Insurance Company.

Assets: Over $195 billion in 2013.

Notable Policy Features:  As part of its product offerings, MassMutual sells own-occupation disability insurance policies to physicians and dentists.  One notable aspect of some MassMutual policies we’ve seen recently is an especially restrictive definition of “Total Disability,” which we sometimes refer to as a “no work” own-occupation definition.  Under the “no work” own-occupation definition, an insured is Totally Disabled if he or she is unable to perform the material and substantial duties of his or her own occupation and not working in any occupation.  Unlike traditional own-occupation policies that allow a physician or dentist to collect total disability benefits and return to work in a different occupation, this one will not pay total disability benefits if the policyholder is doing any type of gainful work.

Claims Management Approach: MassMutual is a highly successful insurer.  In June 2014, it was ranked number 96 in the Fortune 500.  However, Fortune reports that MassMutual is currently experiencing a dramatic reduction in profits.  If MassMutual follows the current trends in the disability insurance industry, we believe it will increase scrutiny on disability insurance claims in order to try to regain its former profit levels.

In our experience, one of the ways MassMutual aggressively approaches claims is to hire a medical consultant to evaluate claimants’ medical records.  The consultant then tries to insert himself or herself between the claimant and the treating physician, writing or calling the treating physician and suggesting treatment methods that, in the consultant’s opinion, will get the claimant back to work as soon as possible.

 

These profiles are based on our opinions and experience. Additional source(s): MassMutual’s 2013 Annual Report; Fortune 500 2014; Bloomberg.com

How Functional Capacity Evaluations Impact
Your Disability Insurance Claim

Our last post discussed what to expect during a functional capacity evaluation (“FCE”), as well as the intended purpose of an FCE.  Though FCEs can be a useful tool for measuring your abilities, FCEs do not always provide results that are truly indicative of your ability to do your job on a regular, consistent basis.  Many courts have recognized the weaknesses and limitations of FCEs in the disability insurance claim context.

Weaknesses and Limitations of FCEs

There are approximately 10 different types of FCEs, each with its own program, measurement methods, and possible evaluative outcomes.  Because FCEs can be influenced by many factors, such as physical ability, beliefs, and perceptions, FCEs need to “be interpreted within the subject’s broad personal and environmental context.”[1] Thus, the FCE “process and its administration are only as good as the examiner.”[2]

Disability insurers often stop paying benefits based on FCE results, even when you can’t actually meet the demands of your former job duties on a consistent basis.  This is due to an inherent limitation of FCE testing: the FCE can only measure your capacity to do a certain task for a limited amount of time on a certain day.  For instance, you may be able to push and pull ten pounds for a few minutes during the FCE, but that doesn’t mean you can do the same task all day, every day.

Another important limitation of FCE testing is how effort is measured.  The FCE examiner normally monitors the subject’s heart rate to determine if he or she is putting forth full effort.  If your heart rate isn’t high enough, the examiner will say you didn’t try your hardest, so you can probably do more than you demonstrated during the testing.  However, there are factors that affect your effort level that can’t be measured by your heart rate alone. For example, heart rate monitoring doesn’t measure the impact of migraine headaches, kidney failure, or other non-exertional limitations (such as interference with attention and concentration due to pain and fatigue).

Continue reading “How Functional Capacity Evaluations Impact
Your Disability Insurance Claim”

What Is a Functional Capacity Evaluation?

After filing a disability insurance claim, your insurance company may ask you to undergo a Functional Capacity Evaluation, or FCE.  The insurer tells you where and when to show up, but you likely have little idea what to expect when you arrive.  What is an FCE, what is its purpose, and how will it affect your claim?

What Is an FCE?

FCEs are formal examinations performed by occupational therapists (OTs) or physical therapists (PTs), not physicians.  The purpose of the FCE, according to your insurer, is to evaluate your ability to perform the substantial and material duties of your occupation.

What Can You Expect at the FCE?

FCEs usually last between four to six hours, but depending on the tests your insurer has requested, they could be longer, taking place over two consecutive days.

Continue reading “What Is a Functional Capacity Evaluation?”

Case Study:
What Does “Material and Substantial” Mean?

In 2007, the Georgia Court of Appeals had to address this question in Pomerance v. Berkshire Life Insurance Company of America. 654 S.E.2d. 638 (2007). Alan Pomerance was an obstetrician/gynecologist with four disability insurance policies from Berkshire. These policies provided own-occupation coverage, meaning that “total disability” was defined as “your inability to perform the material and substantial duties of your occupation.”

Dr. Pomerance’s occupational duties included delivering babies, surgeries, C-sections, office visits, making hospital rounds, and being on call.  After being diagnosed with a degenerative knee condition, Dr. Pomerance filed a total disability claim with Berkshire, explaining that he could no longer stand for long period of time, so he couldn’t perform deliveries and hospital surgeries, be on call, or assist in the emergency room.  Because of his disability, Dr. Pomerance was forced to restrict his practice solely to wellness office visits, which included patient exams, counseling, nonsurgical care, and minor biopsies, but none of his other former duties.

Berkshire declined to pay Dr. Pomerance total disability benefits, arguing that he was only partially disabled because he could still perform one of his “substantial” duties, i.e., office visits.  Dr. Pomerance contacted Berkshire and objected to its determination, but Berkshire still refused him total disability benefits.  Dr. Pomerance filed suit against Berkshire, claiming breach of contract and bad faith refusal to pay the amounts owed.  Continue reading “Case Study: What Does “Material and Substantial” Mean?”

Case Study:
Berkshire Attempts to Use the “Dual Occupation Defense”

When a professional that owns her own business files a disability insurance claim, the insurer will often try to exploit the claimant’s ownership status to deny total disability benefits.  The insurance company will argue that the professional has not one, but two occupations: 1) professional and 2) business owner.  The disability insurer will argue that the claimant isn’t actually disabled because she can still perform administrative or managerial functions, even if she can’t do the duties of her actual profession.  This is sometimes called the “dual occupation defense.”

For example, in Shapiro v. Berkshire Life Insurance Company, Berkshire attempted to use the dual occupation defense to deny total disability benefits to a dentist.  The dentist, Paul Shapiro, had an own-occupation policy, with “total disability” defined as “the inability to perform the material and substantial duties of your occupation.”

Dr. Shapiro owned his own practices, but spent the overwhelming majority of his time and effort doing clinical work.  He spent 90 percent of his time in chairside dentistry, working on patients, and just 10 percent of his time doing the administrative work that any practice owner needs to accomplish.   In fact, in the year before he became disabled, Dr. Shapiro saw nine to eleven patients each day, and performed an average of 275 dental procedures per month, working 40 to 45 hours each week.  He only spent one and a half to four hours each week attending to various administrative and managerial duties like personnel decisions, staff meetings, and computer troubleshooting.

After progressive osteoarthritis and spondylosis of the elbow, neck and other joints left Dr. Shapiro unable to perform chairside dentistry, he filed for total disability benefits with Berkshire.  Rather than paying him total disability benefits, however, Berkshire determined that Dr. Shapiro was only entitled to partial disability benefits:

Berkshire’s coverage position was that Shapiro’s occupation immediately preceding the onset of his disability was as an administrator and manager of his various dental practices as well as a practitioner of chair dentistry; because the disability did not prevent Shapiro from doing his administrative or managerial work, Berkshire reasoned, Shapiro did not satisfy the policies’ definition of total disability: “the inability to perform the material and substantial duties of your occupation.”

Dr. Shapiro brought a suit against Berkshire in the United States District Court for the Southern District of New York for breach of contract, among other things.  That court found in his favor on the breach of contract claim, but Berkshire appealed.  The Second Circuit Court of Appeals agreed with the lower court and affirmed the decision in Dr. Shapiro’s favor.  The Court of Appeals determined that Dr. Shapiro “spent the vast majority of his time performing chair dentistry,” and that his administrative work was merely incidental to his material and substantial duties as a full-time dentist.

Though Berkshire’s attempt at the dual occupation defense was unsuccessful in this case, the Court of Appeals indicated that there could be some situations in which it might work:

At some point, a medical entrepreneur’s administrative and managerial responsibilities may well become the material and substantial duties of the insured’s occupation.

The message for disability insurance policyholders that own a business is to be careful how much time you spend in administrative tasks, and how you explain your occupation to your insurer.  Otherwise, you could be inadvertently setting your claim up for denial.